What’s the similarity & difference between the user fund misappropriation (or rug pull) by First Digital Trust (FDT) and FTX?

That’s a wild dejavu. In the case of FTX, Sam Bankman-Fried (SBF) approached me for a potential rescue plan during its final weeks, which I realized as mission impossible given its mess. Coincidentally, when FDT was exposed for its rug pull on TUSD reserve fund last year, I was again approached for funding support. But this time, I was compelled to back stop user losses, in my capacity as an advisor to Techteryx. Her is my insider’s takeaway from both cases.

Starting with the conclusion: both are extremely serious and egregious cases of fraud and public fund misappropriation. However, the FDT case is significantly worse - here is why:

At FTX, SBF packaged the fund misappropriation as collateralized loans, pledging Alameda Research’s holdings of FTT, SRM, FTX shares and Maps tokens against the “borrowing” of user funds. On surface, it looked like a structured loan backed by valuable collaterals.

In contrast, FDT simply siphoned off $456m from TUSD’s custodial funds without client authorization or knowledge, and booked as loans to a dubious third party Dubai company without any collaterals.